Keeping Investors Informed Pays Dividends Beyond Money

Once you've encouraged an investor to back your business, the relationship is just beginning. Investors can generate assets through contacts and expertise, so keep them informed. "You need to distribute accurate and synthesized information to set and manage expectations over the life of the relationship," said Ed McGovern, managing director for Security Properties, an apartment operator and investor. Whether your investors are friends or pros such as venture capitalists, keep them in the loop to maximize the relationship:

 Know the investor. "Fundraising is still a very personal, relationship-based business," McGovern told IBD. While technology has a role to play, "it's important to resist the temptation to overuse digital communications when cultivating relationships with your investors."

Strike a healthy balance with investor contact. "We definitely leverage Web-based tools to distribute information quickly and efficiently, but we don't let that interfere with the client that has an atypical question or needs a simple issue addressed," he said.

 Target material. McGovern suggests giving investors information they can consume on their own time, such as newsletters. He also advises companies keep their website updated with research studies, news releases, and links to company and industry press coverage.

 Be upfront. That includes dishing out bad news, which is crucial.

That's from Nick Lazaris, CEO of Coravin, which designs and markets products to pour wine from a bottle without pulling the cork.

"Investors will appreciate that the leader is not only honest and straightforward, but is dealing with the issues at hand," he said.

 Staff appropriately. Ensure you have the infrastructure in place to disseminate information to investors. McGovern shares that "today's investor wants to know you have an array of competent and responsive people who are exposed to industry trends, communicate well internally and really understand their responsibilities."

 Pick your audience. Select the right investors — those who can invest in future rounds and who have "the industry knowledge and connections in your field that may lead to important hires and solutions to strategic problems."

 Network.Putting into practice methods to keep investors up-to-date lays the groundwork to finding new ones too. Since raising capital can take hours a day, "it's important to spend your time finding investors who share your thesis about your market and vision instead of trying to change the minds of those who don't."

So said Jef Holove, CEO of Basis, which makes advanced health trackers: "Consider raising money even when you don't need to be. Your negotiating position will be better, and you are likely going to need more than you think."

 Use investor expertise.Give applicable ones board positions and engage them in problem solving, suggests Daniel DeMeo, CEO of Capital Access Network , which helps small businesses find capital. "By engaging our investors in interim problem-solving sessions, the frequent and focused interaction allows them to become more deeply invested in the business and its performance," DeMeo said.

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